Andrew v. Nw. Davenport Sav. Bank

• Decision Date: 06 March 1934
• Docket Number: No. 42371.,42371.
• Citation: 217 Iowa 780,253 N.W. 133
• Parties: ANDREW, Superintendent of Banking, v. NORTHWEST DAVENPORT SAV. BANK. NORTHWEST DAVENPORT SAV. BANK'S RECEIVERSHIP et al. v. WERTHMANN et al.
• Court: Iowa Supreme Court

217 Iowa 780

253 N.W. 133

ANDREW, Superintendent of Banking,

v.NORTHWEST DAVENPORT SAV. BANK.

NORTHWEST DAVENPORT SAV. BANK'S RECEIVERSHIP et al.

v.WERTHMANN et al.

No. 42371.

Supreme Court of Iowa.

March 6, 1934.

Appeal from District Court, Scott County; W. W. Scott, Judge.

This is a controversy over the claims of certain claimants in a bank receivership case. The respective claims of the claimants are that certain of the funds coming into the hands of the receiver were the property of the claimants and that they held the title thereto. The three claimants are Charles E., Julius J., and A. W. Werthmann. On December 8, 1932, these claimants had held a joint auction sale of certain personal property owned in severalty by them. They employed Wilcken as auctioneer. Wilcken employed Albert Eggert, as clerk of the sale. The net proceeds of the sale were $1,501.45. Of this amount the sum of $1,165.20 belonged to Charles E., as the proceeds of his property; $188.32 thereof belonged to Julius, as the proceeds of his property; and $64.95 belonged to A. W. Eggert was the cashier of the Northwest Davenport Savings Bank, now in receivership. Immediately after the sale and on December 9 or 10, Eggert used all the proceeds of the sale in the purchase of a cashier's check of the said bank. The check thus purchased was treated by Eggert as the equivalent of a deposit. Immediately following the sale the Werthmanns successively called for their proceeds. They were advised by Eggert that the proceeds were not yet collected and that they would have to wait for such collection. This first occurred on December 10. Other requests were made later and were met by Eggert with the same excuse. The Werthmanns had no knowledge of the cashier's check. Nor did they ever consent to any conversion of their proceeds. Successive requests by them were successfully evaded until the bank went into the hands of the receiver on December 26. Such are the salient facts in the case.

Reversed.

Bush & Bush, of Davenport, for appellant.

Edward L. O'Connor, Atty. Gen., for the State.

Louis E. Roddewig, of Davenport, for appellee.

EVANS, Justice.

[1][2] There is no substantial conflict in the evidence. That the claimants were the owners of the proceeds of their respective items of property is conceded. That they never consented to, or knew of, the exchange of those proceeds for a cashier's check of the bank is clear upon the record. The conversion of the proceeds into a cashier's check payable to Eggert and signed by him as cashier was accomplished by the joint action of Eggert and of the teller of the bank. There can be no doubt under the authorities that an agent, who collects the funds of his principal, holds such funds as a trustee and that the title thereof rests in the principal and not in the agent. It is equally true that an unauthorized disposition of the funds by the agent does not divest them of their trust character except where the rights of third parties without notice become involved. Under the record in this case the duty of the agent to turn over the proceeds to his principal had fully matured long prior to December 26, the date of the receivership. The general rule applicable to such cases is cited by us in Cable v. Iowa State Savings Bank, 197 Iowa, 393, 194 N. W. 957, 959, 197 N. W. 434, 31 A. L. R. 748, as follows:

“The law is well settled that the title to property consigned to a factor or commission merchant for sale remains in the consignor, and that such factor or commission merchant holds the proceeds derived from the sale of such property in a fiduciary or trust capacity, and that its character is not changed by being placed to his credit in the bank * * * that the owner may maintain an action in equity against a bank to impress a trust upon any portion of the funds deposited thereinby such factor or commission merchant to his own credit and remaining in said bank, unless it has acquired an equitable right thereto without notice of the true claims of the owner.”

In 2 C. J. 881 and 882, the rule of the authorities is summarized as follows:

“The general rule is that the principal may recover his property or its value from a third person, where it has been wrongfully transferred by his agent contrary to his authority. Thus where an agent without apparent authority uses property of his principal to liquidate his own indebtedness to a third person, or otherwise disposes of it, such property or its value may ordinarily be recovered by the principal by an action of replevin or other appropriate action. It is no defense to the third person that the agent is liable to the principal for his wrongful act, or that the third person has promised to pay the agent for an indebtedness owing to the principal. * * *

Money or property intrusted to an agent for a particular purpose is impressed by the law with a trust in favor of the principal until it has been devoted to such purpose; and where it has been wrongfully diverted by the agent such trust generally follows the fund or property in the hands of a third person, and the principal is ordinarily entitled to pursue and recover it as long as it can be traced and identified.”

In an annotation to the case of Cable v. Iowa State Savings Bank, above cited, in 31 A. L. R. 756, the rule is summarized as follows:

“The universally accepted rule that knowledge upon the part of a bank that deposits made by a debtor in his own name belong to a third person absolutely precludes the bank from applying such funds to the individual indebtedness of the depositor to it is recognized in the following recent cases.”

In Andrew v. State Bank of New Hampton, 205 Iowa, 1068, 217 N. W. 250, 252, we said:

“Fundamentally, the remedy in actions of this kind is based upon an interest in or ownership of the particular property or fund claimed, rather than the relationship of debtor and creditor. 26 R. C. L. 1351, § 216, contains this text:

‘* * * The true owner of a trust fund traced to the possession of another has the right to have it restored, not as his debt due and owing, but because it is his property wrongfully withheld from him. * * *’

First State Bank v. Oelke, 149 Iowa, 662, 129 N. W. 70, expresses the same thought in this language:

‘The right to a preference is based on a right in the particular property or fund, and the manner of acquiring such property or fund is not material, that being only an incident thereto.’

Leach v. Iowa State Sav. Bank, 204 Iowa, 497 , 215 N. W. 728. * * *

Returning now to the precise point involved, we pause to note that controversies of this nature include at least two steps: First, the establishment of the ‘trust’; and, second, the tracing into the custody of the receiver the deposit, payment, or ‘property’ previously made or delivered in or to the bank, which said receipts are asserted as the basis for the ‘trust.”’

Literally scores of our own cases could be cited in support of the foregoing rule; and quite as many could be cited from other jurisdictions.

The response of the appellee to the foregoing discussion is affirmative and by way of avoidance. These affirmative grounds are in substance as follows: He contends that Eggert became the agent for the claimants in his functions as clerk of the sale; that he was not thereby acting as agent of the bank; that the bank was not chargeable with his acts or with notice thereof; that the bank did not thereby become a trustee for the...